Vornado Realty sells $500 million convertible at 3.875%, up 30%; to be reoffered at 98-98.5

By Ronda Fears

Nashville, March 22 - Vornado Realty Trust sold $500 million of 20-year exchangeable senior debentures with a 3.875% coupon and 30% initial conversion premium. The issue was being talked in the overnight market at a reoffer price of 98 to 98.5 by sole bookrunner Citigroup Global Markets Inc., according to market sources.

Books on the registered deal will close at 9 a.m. Wednesday.

The senior notes will be non-callable for seven years, with puts in years seven, 10 and 15. Vornado, whose stock already pays a 4.25% yield, can boost its common dividend up to 5% per year without having to adjust the exchange ratio on the convertible. At par, the exchange price on the issue is $91.25, for an exchange ratio of 10.9589.

There is a $75 million greenshoe available.

New York-based Vornado owns all or portions of the office properties totaling 27.6 million square feet in the New York City metropolitan area, primarily Manhattan, and prime spots in the heart of Washington, D.C. and northern Virginia areas. In addition, the company owns retail properties in seven states and Puerto Rico and a 47.6% interest in Americold Realty Trust, which owns and operates 88 cold storage warehouses nationwide.

Proceeds will be used for working capital and other corporate purposes, Vornado said.

Vornado is part of the consortium of bidders, along with Kolberg Kravis Roberts and Bain Capital to buy Toys 'R' Us Inc. in a $6.6 billion deal.

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